1 Sell at Split-Off or Process Further Decision, Alternatives, Relevant CostsVihaan Chemicals Company processes a number of chemical compounds used in disinfecting health club fitness equipment. One compound is decomposed into two chemicals: flexalene and soreaphine. The cost ofprocessing one batch of compound is $78,000, and the result is 6,400 gallons of flexalene and 8,200 gallons of soreaphine. Vihaan Chemicals can sell the flexalene at split-off for $12.00 per gallon and thesoreaphine for $5.90 per gallon. Alternatively, the flexalene can be processed further at a cost of $8.90 per gallon (of flexalene) into lactine. It takes 4 gallons of flexalene for every gallon of lactine. A gallon oflactine sells for $64.Required:1. Which alternative is more cost effective and by how much?NOTE: Do NOT round interim calculations and, if required, round your answer to the nearest dollar.▼by2. What if the production of flexalene into lactine required additional purchasing and quality inspection activity? Every 460 gallons of flexalene that undergo further processing require 22 more purchase orders at$12 each and 13 more quality inspection hours at $25 each. Which alternative would be better and by how much?NOTE: Round interim calculations and your final answer to the nearest cent.by $

Introduction: When the maximum advantage is obtained for a relatively cheap price, a transaction is…

1. Which alternative is more cost effective and by how much? NOTE: Do NOT round interim calculations and, if required, round your answer to the nearest dollar. by s 2. What if the production of flexalene into lactine required additional purchasing and quality inspection activity? Every 460 gallons of flexalene that undergo further processing require 22 more purchase orders at $12 each and 13 more quality inspection hours at $25 each. Which alternative would be better and by how much? NOTE: Round interim calculations and your final answer to the nearest cent.

1. Which alternative is more cost effective and by how much? NOTE: Do NOT round interim calculations and, if required, round your answer to the nearest dollar. by s 2. What if the production of flexalene into lactine required additional purchasing and quality inspection activity? Every 460 gallons of flexalene that undergo further processing require 22 more purchase orders at $12 each and 13 more quality inspection hours at $25 each. Which alternative would be better and by how much? NOTE: Round interim calculations and your final answer to the nearest cent.

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter8: Tactical Decision-making And Relevant Analysis

Section: Chapter Questions

Problem 58P: Sell or Process Further Zanda Drug Corporation buys three chemicals that are processed to produce...

See similar textbooks

Similar questions

Sell or process further Calgary Lumber Company incurs a cost of 315 per hundred board feet (hbf) in processing certain rough-cut lumber, which it sells for 440 per hbf. An alternative is to produce a finished cut at a total processing cost of 465 per hbf, which can be sold for 600 per hbf. Prepare a differential analysis dated March 15 on whether to sell rough-cut lumber (Alternative 1) or process further into finished-cut lumber (Alternative 2).
Sell at Split-Off or Process Further Eunice Company produces two products from a joint process. Joint costs are 70,000 for one batch, which yields 1,000 liters of germain and 4,000 liters of hastain. Germain can be sold at the split-off point for 24 or be processed further, into geraiten, at a manufacturing cost of 4,100 (for the 1,000 liters) and sold for 33 per liter. If geraiten is sold, additional distribution costs of 0.80 per liter and sales commissions of 10% of sales will be incurred. In addition, Eunices legal department is concerned about potential liability issues with geraitenissues that do not arise with germain. Required: 1. CONCEPTUAL CONNECTION Considering only gross profit, should germain be sold at the split-off point or processed further? 2. CONCEPTUAL CONNECTION Taking a value-chain approach (by considering distribution, marketing, and after-the-sale costs), determine whether or not germain should be processed into geraiten.
Sell or Process Further, Basic Analysis Shenista Inc. produces four products (Alpha, Beta, Gamma, and Delta) from a common input. The joint costs for a typical quarter follow: The revenues from each product are as follows: Alpha, 100,000; Beta, 93,000; Gamma, 30,000; and Delta, 40,000. Management is considering processing Delta beyond the split-off point, which would increase the sales value of Delta to 75,000. However, to process Delta further means that the company must rent some special equipment that costs 15,400 per quarter. Additional materials and labor also needed will cost 8,500 per quarter. Required: 1. What is the operating profit earned by the four products for one quarter? 2. CONCEPTUAL CONNECTION Should the division process Delta further or sell it at split-off? What is the effect of the decision on quarterly operating profit?
Jonfran Company manufactures three different models of paper shredders including the waste container, which serves as the base. While the shredder heads are different for all three models, the waste container is the same. The number of waste containers that Jonfran will need during the following years is estimated as follows: The equipment used to manufacture the waste container must be replaced because it is broken and cannot be repaired. The new equipment would have a purchase price of 945,000 with terms of 2/10, n/30; the companys policy is to take all purchase discounts. The freight on the equipment would be 11,000, and installation costs would total 22,900. The equipment would be purchased in December 20x4 and placed into service on January 1, 20x5. It would have a five-year economic life and would be treated as three-year property under MACRS. This equipment is expected to have a salvage value of 12,000 at the end of its economic life in 20x9. The new equipment would be more efficient than the old equipment, resulting in a 25 percent reduction in both direct materials and variable overhead. The savings in direct materials would result in an additional one-time decrease in working capital requirements of 2,500, resulting from a reduction in direct material inventories. This working capital reduction would be recognized at the time of equipment acquisition. The old equipment is fully depreciated and is not included in the fixed overhead. The old equipment from the plant can be sold for a salvage amount of 1,500. Rather than replace the equipment, one of Jonfrans production managers has suggested that the waste containers be purchased. One supplier has quoted a price of 27 per container. This price is 8 less than Jonfrans current manufacturing cost, which is as follows: Jonfran uses a plantwide fixed overhead rate in its operations. If the waste containers are purchased outside, the salary and benefits of one supervisor, included in fixed overhead at 45,000, would be eliminated. There would be no other changes in the other cash and noncash items included in fixed overhead except depreciation on the new equipment. Jonfran is subject to a 40 percent tax rate. Management assumes that all cash flows occur at the end of the year and uses a 12 percent after-tax discount rate. Required: 1. Prepare a schedule of cash flows for the make alternative. Calculate the NPV of the make alternative. 2. Prepare a schedule of cash flows for the buy alternative. Calculate the NPV of the buy alternative. 3. Which should Jonfran domake or buy the containers? What qualitative factors should be considered? (CMA adapted)
Zena Technology sells arc computer printers for $55 per unit. Unit product costs are: A special order to purchase 15,000 arc printers has recently been received from another company and Zena has idle capacity to fill the order. Zena will incur an additional $2 per printer for additional labor costs due to a slight modification the buyer wants made to the original product. One-third of the manufacturing overhead costs is fixed and will be incurred no matter how many units are produced. When negotiating the price, what is the minimum selling price that Zena should accept for this special order?
Sell or Process Further Zanda Drug Corporation buys three chemicals that are processed to produce two types of analgesics used as ingredients for popular over-the-counter drugs. The purchased chemicals are blended for 2 to 3 hours and then heated for 15 minutes. The results of the process are two separate analgesics, depryl and pencol, which are sent to a drying room until their moisture content is reduced to 6 to 8%. For every 1,300 pounds of chemicals used, 600 pounds of depryl and 600 pounds of pencol are produced. After drying, depryl and pencol are sold to companies that process them into their final form. The selling prices are 12 per pound for depryl and 30 per pound for pencol. The costs to produce 600 pounds of each analgesic are as follows: The analgesics are packaged in 20-pound bags and shipped. The cost of each bag is 1.30. Shipping costs 0.10 per pound. Zanda could process depryl further by grinding it into a fine powder and then molding the powder into tablets. The tablets can be sold directly to retail drug stores as a generic brand. If this route were taken, the revenue received per bottle of tablets would be 4.00, with 10 bottles produced by every pound of depryl. The costs of grinding and tableting total 2.50 per pound of depryl. Bottles cost 0.40 each. Bottles are shipped in boxes that hold 25 bottles at a shipping cost of 1.60 per box. Required: 1. CONCEPTUAL CONNECTION Should Zanda sell depryl at split-off, or should depryl be processed and sold as tablets? 2. If Zanda normally sells 265,000 pounds of depryl per year, what will be the difference in profits if depryl is processed further?
Sell or process further Dakota Coffee Company produces Columbian coffee in batches of 7,500 pounds. The standard quantity of materials required in the process is 7,500 pounds, which cost 6.00 per pound. Columbian coffee can be sold without further processing for 9.80 per pound. Columbian coffee can also be processed further to yield Decaf Columbian, which can be sold for 11.60 per pound. The processing into Decaf Columbian requires additional processing costs of 6,300 per batch. The additional processing will also cause a 5% loss of product due to evaporation. a. Prepare a differential analysis dated December 11 on whether to sell regular Columbian (Alternative 1) or process further into Decaf Columbian (Alternative 2). b. Should Dakota Coffee Company sell Columbian coffee or process further and sell Decaf Columbian? Explain. c. Determine the price of Decaf Columbian that would cause neither an advantage nor a disadvantage for processing further and selling Decaf Columbian.
Sell at Split-Off or Process Further Decision, Alternatives, Relevant Costs Vihaan Chemicals Company processes a number of chemical compounds used in disinfecting health club fitness equipment. One compound is decomposed into two chemicals: flexalene and soreaphine. The cost of processing one batch of compound is $71,000, and the result is 5,500 gallons of flexalene and 7,700 gallons of soreaphine. Vihaan Chemicals can sell the flexalene at split-off for $12.00 per gallon and the soreaphine for $7.20 per gallon. Alternatively, the flexalene can be processed further at a cost of $8.60 per gallon (of flexalene) into lactine. It takes 4 gallons of flexalene for every gallon of lactine. A gallon of lactine sells for $65. Required: 1. Which alternative is more cost effective and by how much? NOTE: Do NOT round interim calculations and, if required, round your answer to the nearest dollar. by $fill in the blank 2 2. What if the production of flexalene into lactine required additional…
Sell at Split-Off or Process Further Decision, Alternatives, Relevant Costs Vihaan Chemicals Company processes a number of chemical compounds used in disinfecting health club fitness equipment. One compound is decomposed into two chemicals: flexalene and soreaphine. The cost of processing one batch of compound is $79,000, and the result is 5,900 gallons of flexalene and 8,500 gallons of soreaphine. Vihaan Chemicals can sell the flexalene at split-off for $11.00 per gallon and the soreaphine for $6.65 per gallon. Alternatively, the flexalene can be processed further at a cost of $7.10 per gallon (of flexalene) into lactine. It takes 4 gallons of flexalene for every gallon of lactine. A gallon of lactine sells for $56. Required: 1. Which alternative is more cost effective and by how much?NOTE: Do NOT round interim calculations and, if required, round the answer to the nearest dollar. by $fill in the blank 2 2. What if the production of flexalene into lactine required additional…
Sell at Split-Off or Process Further Decision, Alternatives, Relevant Costs Betram Chemicals Company processes a number of chemical compounds used in producing industrial cleaning products. One compound is decomposed into two chemicals: anderine and dofinol. The cost of processing one batch of compound is $74,000, and the result is 6,000 gallons of anderine and 8,000 gallons of dofinol. Betram Chemicals can sell the anderine at split-off for $11 per gallon and the dofinol for $6.75 per gallon. Alternatively, the anderine can be processed further at a cost of $8 per gallon (of anderine) into cermine. It takes 3 gallons of anderine for every gallon of cermine. A gallon of cermine sells for $60. Required: 1. Which alternative is more cost effective and by how much? by $ 2. What if the production of anderine into cermine required additional purchasing and quality inspection activity? Every 500 gallons of anderine that undergo further processing require 20 more purchase orders at $10 each…
Sell at Split-Off or Process Further Decision, Alternatives, Relevant Costs Betram Chemicals Company processes a number of chemical compounds used in producing industrial cleaning products. One compound is decomposed into two chemicals: anderine and dofinol. The cost of processing one batch of compound is $75,000, and the result is 6,200 gallons of anderine and 8,200 gallons of dofinol. Betram Chemicals can sell the anderine at split-off for $11.00 per gallon and the dofinol for $6.65 per gallon. Alternatively, the anderine can be processed further at a cost of $8.90 per gallon (of anderine) into cermine. It takes 2 gallons of anderine for every gallon of cermine. A gallon of cermine sells for $59. Required: 1. Which alternative is more cost effective and by how much?NOTE: Do NOT round interim calculations and, if required, round your answer to the nearest dollar. by $fill in the blank 2. What if the production of anderine into cermine required additional purchasing and quality…
Sell at Split-Off or Process Further Decision, Alternatives, Relevant Costs Betram Chemicals Company processes a number of chemical compounds used in producing industrial cleaning products. One compound is decomposed into two chemicals: anderine and dofinol. The cost of processing one batch of compound is $77,000, and the result is 6,000 gallons of anderine and 8,400 gallons of dofinol. Betram Chemicals can sell the anderine at split-off for $11.00 per gallon and the dofinol for $5.60 per gallon. Alternatively, the anderine can be processed further at a cost of $8.60 per gallon (of anderine) into cermine. It takes 4 gallons of anderine for every gallon of cermine. A gallon of cermine sells for $62. Required: 1. Which alternative is more cost effective and by how much? 2. What if the production of anderine into cermine required additional purchasing and quality inspection activity? Every 500 gallons of anderine that undergo further processing require 21 more purchase orders at $11 each…